Definition of Agriculturist has been provided in section 2 (17) of the CGST act 2017. Article discusses definition of Agriculturist, Scope of definition of Agriculturist, Whether an agriculturist is liable to pay tax, Whether an agriculturist is liable to registered, Meaning of produce out of cultivation of land, Definition of an agricultural produce, Relevant judgment on agricultural produce, Advance ruling on agricultural produce and Circular on agricultural produce.
1. Sub section 17 of section 2 of CGST act provides for definition of “ Agriculturist”, which read as under
“agriculturist” means an individual or a Hindu Undivided Family who under takes cultivation of land—
(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family;
2. The said definition is wide enough to cover any person , who undertake cultivation of land by own labour, or by the labour of family, or by servant or by hired labour under supervision of him or his family members, as agriculturist. Supervision would mean to observe and direct the execution of task. It appears from the definition that a person who cultivate land on crop share basis would not be regarded as ‘ Agriculturist ‘.
3. As per provisions of the act, every taxable person is required to pay tax on all supplies of goods or services or both ( except on supply of alcoholic liquor for human consumption) at schedule rate notified under the act. Thus it is seen that liability to pay tax is on taxable person.
4. In order to determine taxability of supplies by agriculturist, it is necessary to decide whether it is taxable person within meaning of section 2 (107). As per said section taxable person means a person who is registered or liable to be registered under section 22 or 24. According to section 22 every supplier making taxable supply of goods or services in the state shall be liable to be registered under the act if his aggregate turnover exceed twenty lakh in a financial year. However, section 23(1)(b) states that an agriculturist is not liable for registration to the extent of supply of produce out of cultivation of land. Thus, an agriculturist is not taxable person and not liable for registration and consequently not liable to pay tax on supplies of agricultural produce.
5. However, it is pertinent to note that this exemption is restricted to the supplies of produce out of cultivation of land. Definition of agriculturist is provided in the act but term “produce out of cultivation of land “ is not defined in the act. It is an agricultural produce. Definition of agricultural produce is given in the notification no 12/2017 CTR. However this definition is with reference to entry 54 under heading 9986 of said notification- “ Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of “ Though, above definition inserted for interpretation of supply of services various Advance Ruling Authorities while passing advance ruling order applied the said definition , while deciding issue of tax rate and liablity of registration on supply of produce out of cultivation of land. Definition of “agricultural produce “ is reproduced hereunder.
6. “agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;
7. In the case of M/s D S Bist & Sons Nainital 1979(004) SCC 741, the Hon Supreme court has observed that, in case of certain kind of agricultural produce which require some more processing to make it marketable, what one to judge is to find out whether in relation to that agricultural produce, the process applied was minimal or was it so cumbersome or long drawn that either, in common parlance or in the market, or even otherwise, anybody would not treat the produce as an agricultural produce.
8. Advance Ruling Authority Maharashtra, while passing advance ruling order( 108/2019-20 Dt 22-12-2021 ), in the case of M/s Nitin Bapusaheb Patil has observed that dried and polished turmeric is not covered under definition of “ agricultural produce” and is liable to pay tax @ 5 % being covered under heading 0910 , ginger ( other than fresh ginger), saffron, turmeric ( other than fresh turmeric ) spices etc. The authority has relied on the definition of “ agricultural produce provided in notification 12/2017 and observed that processes of boiling, drying, and shining which are applied to carried turmeric, add to the marketability and value of turmeric and make them suitable for sale directly to the consumers.
9. On the issue of applicability of GST on warehousing of agricultural produce, Govt of India has issued circular no 16/16/2017 GST 15/11/2017 and clarified that processed products such as tea (i.e. black tea, white tea etc.), processed coffee beans or powder, pulses (de husked or split), jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall outside the definition of agricultural produce given in notification No. 11/2017-CT (Rate) and 12/2017-CT(Rate). It is further clarified that
10. Thus, green tea leaves and not tea is the “agricultural produce” eligible for exemption available for loading, unloading, packing, storage or warehousing of agricultural produce. Same is the case with coffee obtained after processing of coffee beans. Similarly, processing of sugarcane into jaggery changes its essential characteristics. Thus, jaggery is also not an agricultural produce. Pulses commonly known as dal are obtained after de husking or splitting or both. The process of de husking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore pulses (de husked or split) are also not agricultural produce. However whole pulse grains such as whole gram, rajma etc. are covered in the definition of agricultural produce.
11. Normally, farmer is required to carry out certain processes on agricultural produce to make it marketable. It is always necessary to determine whether such processes alter essential characteristic of the agricultural produce. If such processes make it marketable for primary market without altering it essential characteristic then such agricultural produce is regarded as produce out of cultivation of land. In this scenario said agriculturist is not liable for registration to the extent of such supply of produce out of cultivation of land and is not liable to pay tax under the act.
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